1.2.2 Enterprise vs. consumer products
Another important distinction is between companies that build enterprise products (B2B - business to business) and companies that build customer products (B2C - business to consumer).
B2B companies build products for organizations. Examples of enterprise products are Customer relationship management (CRM) software, project management tools, database management systems, cloud hosting services, etc.
B2C companies build products for individuals. Examples of consumer products are social networks, search engines, ride-sharing services, health trackers, etc.
Many companies do both -- their products can be used by individuals but they also offer plans for enterprise users. For example, Google Drive can be used by anyone but they also have Google Drive for Enterprise.
Even if a B2C company doesn’t create products for enterprises directly, they might still need to sell to enterprises. For example, Facebook’s main product is used by individuals but they sell ads to enterprises. Some might argue that this makes Facebook users products, as famously quipped: “If you’re not paying for it, you’re not the customer; you’re the product being sold.14”
These two types of companies have different sales strategies and engineering requirements. Consumer products tend to rely on viral marketing (e.g. invite your friends and get your next order for free) to reach a large number of users. Selling enterprise products tends to require selling to each user separately.
Enterprise companies usually have the role of solutions architect and its variances (solutions engineer, enterprise architect) to work with enterprise customers to figure out how to use the tool for their use cases.
🌳 Tip 🌳
Since these two types of companies have different business models, they need to be evaluated differently when you consider joining them.For enterprise products, you might want to ask:
- How many customers do they have? What's the customer growth rate (e.g. do they sign on a customer every month)?
- How long is their sales cycle (e.g. how long it usually takes them from talking to a potential customer to closing the contract)?
- How does their pricing structure work?
- How hard is it to integrate their product with their customers' systems?
For consumer products, you might want to ask:
- How many active users do they have? What's their user growth rate?
- How much does it cost to acquire a user? This is extremely important since the cost of user acquisition has been hailed as a startup killer15.
- Do users pay to use the product? If not, how are they going to make money?
- What privacy measures do they take when handling users' data? E.g. you don’t want to work for the next Cambridge Analytica.
14: You’re Not the Customer; You’re the Product (Quote Investigator).
15: Startup Killer: the Cost of Customer Acquisition by David Skok.
This book was created by Chip Huyen with the help of wonderful friends. For feedback, errata, and suggestions, the author can be reached here.
